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Sony Reports Billion Dollar Loss

sjohnson
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Posted May 14, 2009 - By Stephen Johnson

Sony Freezing SalariesThis is a bad day for Sony. The company announced today that it had suffered its first annual monetary loss in 14 years. The home of the PlayStation lost over a billion dollars last year. Worse, maybe, than that, Sony expects to lose even more next year. The company is bracing for a loss of $1.26 billion, in the business year ending in March 2010. To put this in perspective, though, a billion loss isn't that much, compared to the losses at companies like GM, Chrysler, AIG or Bank of America.

A bright spot in the forecast: Sales of the PlayStation 3 and the PSP picked up in the 2009 financial year. To address the losses, Sony intends to close three more factories in Japan.

While the immediate causes for the loss have more to do with a tanking world economy than any specific decisions Sony has made, the downward spiral may be indicative of deeper, systemic problems at the company. Over the last 20 years, Sony has cornered, then lost the market in some of the most important sectors in technology.

  • Home music players: It was a long time ago, so it's easy to forget, but Sony practically invented personal music players with the Walkman -- now they are a tiny part of a market owned by Apple.
  • Video Game Systems: Obviously, the PlayStation 2 was the winner in the last generation of the video game consoles, but this time around, Nintendo is cleaning Sony's clock (along with everyone else's, of course.) Nintendo dominates Sony both in terms of home consoles and handheld.
  • Televisions: Sony trails Samsung, and Sony's TV division has been losing money for years.
  • Camcorders: While Sony is still a major power-house when it comes to camcorders, cheaper, web-ready cameras like the Flip are eating into its market share.

Let me spell out the pattern here: Sony tends to focus on high-end electronics for connoisseurs, but most people in the world don't seem to care about things like that. Case-in-point: The PlayStation 3 versus the Wii. Sure, the PS3 is a much more powerful system than the Wii, with technical specs that blow Nintendo's console out of the water, but people are more willing to buy the Wii because it's seen as fun, accessible and not intimidating. To paraphrase The New York Times, Sony seems to be basing their strategy on the Japanese model, where people don't mind paying top dollar for top electronics, but in the rest of the world, most people would rather have a simple,  inexpensive product that is reliable, than anything "cutting edge."

Hopefully, a brighter day is just around the corner for Sony, and the company has a "killer-app," a must-have product akin to the Walkman or the PlayStation One, up its sleeve.

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Sony Reports Billion Dollar Loss
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